Sunday, August 1, 2010

New Restrictions Placed on Debt Settlement Companies

The Federal Trade Commission yesterday announced new restrictions on companies that purport to help borrowers get rid of crippling amounts of debt, the New York Times reported today. The rules, which will take effect in the fall, prohibit companies from charging a fee before they settle or reduce a customer's credit card or unsecured debt. The rules also require that the companies set up dedicated accounts for debt relief payments by consumers and disclose how long the debt-reduction efforts will take, what they will cost and the potentially negative consequences that could occur.

“Too many of these companies pick the last dollar out of consumers’ pocket and, far from leaving them better off, push them deeper into debt, even bankruptcy,” Jon Leibowitz, chairman of the F.T.C., said in a statement announcing the regulations.